I founded Makovsky in 1979 after working with one of the top PR agencies in the world. I've been named a “PR All-Star” and the top business-to-business counselor in the public relations industry, I'm the 2007 winner of the John W. Hill Award, the New York Chapter of PRSA's most prestigious individual award, and I was inducted into the PR News Hall of Fame in 2008. I just won the Grand Prize of "Communications Professional of the Year" at the Bulldog Awards, where I was also named "PR Blogger of the Year" and "PR Agency Pro of the Year" for the second consecutive year. Founder and past president of IPREX, the second largest global corporation of independent public relations firms, I'm a member of The College of Fellows, the honorary organization of the Public Relations Society of America; the Arthur Page Society, an honorary organization of public relations leadership; the Advisory Committee of the Newhouse School of Communications (Syracuse University) Public Relations Executive Distant Learning Program and the Board of Trustees of the Institute for Public Relations. I'm the former president of the Washington University Alumni Club in New York and currently a member of the University’s Board for the School of Arts and Sciences. I hold a JD degree from Washington University School of Law in St. Louis as well as a Bachelor of Arts from the University.

12/10/2012 @ 2:34PM101 views

When Socializing Is Not Enough

Unfortunately, social media is not an agenda item for many of the chairmen (or chairwomen) of this nation’s public companies. Why? Largely, in my opinion, because of SEC disclosure laws regarding the release of material information via press release and wire service. With a “social” distribution, leadership fears slipping up and making a “material comment” should they be, for example, tweeted a question they’d rather not answer.

The other side of the coin is that there are marketing-savvy corporate leaders who see every reason in the world to communicate with their stakeholders via the web — it brings them closer to the customer, enhancing loyalty and motivating product purchases. Material information (any news that has a material effect on the business) can be particularly exciting, and should be socialized, but must also meet legal disclosure requirements before that happens.

The issue is that the two must not be confused. The chairperson must understand what material information is. And he or she must understand the channels required for distribution, so that critical information is accessible to all investors simultaneously. At this juncture, social media does not qualify as an SEC-approved channel. But social media is, in every respect, an essential marketing channel that can be employed productively, once material information has been legally disclosed.

Here is a case in point: Netflix. The company noted on Facebook that its members were now enjoying nearly a billion hours per month of Netflix — an exciting and material development. Reed Hastings, Netflix chairman, says he has 200,000 subscribers on Facebook and because he told that many subscribers, there was no need to send a press release through traditional channels (e.g., PR Newswire, Business Wire) to meet SEC standards.

The SEC did not agree. Announcing material information on Facebook , it stated, does not meet the SEC standard for disclosure. Two hundred thousand Facebook subscribers is not the equivalent of all Netflix investors. And right now there is no social channel that does that. Nevertheless, efforts have been made to post material information on a blog, and then put out a press release that investors can find it on that blog. Thus far, the SEC has not accepted that approach either.

Reed Hastings, Netflix chairman, wrote a letter on Facebook to his subscribers in which he said: “ We think the fact of 1 billion hours of viewing in June was not ’material‘ to investors, and we had blogged a few weeks before that we were serving NEARLY 1-billion hours per month.” He noted that he remained optimistic that this can be cleared up with the SEC.

As the rules now stand, I’d be surprised if Reed Hastings gets away with this; although it is an effort to break new ground, I believe there will be an SEC action. A billion hours is indeed a material marketing fact that could stimulate the stock and encourage others to buy Netflix products. Thus, while this information can be socialized, it also needs to go through traditional proactive channels so that all current and potential investors have simultaneous access to the news via designated wire services. The only issue here is Reed Hastings’ image with his investors and other stakeholders.

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